Sudip Ahluwalia, Member
This Consumer Complaint has been filed under Section 21 (a)(i) of the Consumer Protection Act, 1986, seeking payment of the claimed amount under the Insurance Policy.
2. The factual background, in brief, is that the Complainant is a Company engaged in the manufacture and sale of sugar and allied products from its Baheri, Bareilly unit. It obtained a Standard Fire and Special Perils Policy from the Opposite Party, covering its establishment/stock including molasses stored in Tank No. 4. The Policy was valid from 01.07.2016 to 30.06.2017 and included perils such as STFI, earthquake, and spontaneous combustion. The loss in question occurred on 12.03.2017 when molasses from Tank No. 4 leaked in large quantities, which was discovered by the staff on a Sunday and festival day (Holi), with preliminary inquiry and internal investigations pointing to sabotage or malicious damage to the valve system of the Tank. The Complainant immediately informed the local Police and the Excise Department, and salvage operations were carried out to minimize the loss. Internal Inquiry Reports dated 20.03.2017 and 21.03.2017 by Senior Technical and Security Officers concluded deliberate tampering of the discharge valve and associated fittings, with no other structural defect or mechanical failure evident. A Police FIR under Section 427 IPC was lodged on 17.04.2017, and while the Final Report filed on 16.12.2017 did not identify the offender, it reiterated the possibility of sabotage by an unknown person(s) intending financial loss.
3. The Complainant submitted all relevant documentation and explanations to the Surveyor and Loss Assessor, including contemporaneous photographs, daily stock registers, salvage operation details, sale invoices of molasses (used to compute loss), and copies of correspondence with Excise and Labour Departments. It was highlighted that retrenchment of labour and cane dues worth Rs. 50 crores were pending, causing unrest, and possibly contributed to the sabotage. The molasses loss was computed based on prevailing market rates, Rs. 500/- per quintal for free sale, and Rs. 150/- per quintal for levy molasses, for a total quantity of 25,049 quintals lost. Salvaging expenses were also claimed as per the Policy. The Claim was ultimately repudiated by the Respondent on 28.03.2018, citing lack of credible proof of sabotage, delay in FIR, and improbability of such an incident occurring in a guarded premises. The Complainant challenged these grounds, asserting that the delay in FIR was due to procedural constraints, sabotage was confirmed by independent and internal inquiries, and even the Surveyor's own site visit occurred after 130 days of the incident, when rusting and jamming of valves had already occurred. It was emphasized that the gate valve design and physical configuration of Tank No. 4 rendered the sabotage hypothesis technically and circumstantially plausible.
4. It is the case of the Complainant that the repudiation was arbitrary and contrary to Clause V of the Policy which covered losses due to riot, strike, and malicious damage, and violated the principles of natural justice as the Complainant's objections to the Surveyor's findings were never dealt with. The Complainant avers that the burden of proof in civil Insurance Claims is "on the balance of probabilities" and not "beyond reasonable doubt", and this threshold had been duly met. The repudiation, thus, amounted to both deficiency in service and an unfair trade practice under the Act. Aggrieved with the same, the present Complaint was filed with the following prayers -
"(a) Allow the present complaint;
(b) Hold the Respondent as having committed and deficiency in service & direct the Respondent Insurance Company to disburse the claim of the amount of Rs 1,04,17,612.50 (One Crore, Four Lakhs, Seventeen Thousand Six Hundred and Twelve Rupees and fifty paise) as claimed by the complainant, together with interest @ 14% p.a. from 12.03.2017 till payment;
(c) Set aside the letter dated 28.03.2018 received on 19.04.2018 issued by Respondent repudiating the Claim raised by the Complainant as well as the surveyor's report dated 01.02.2018 as being contrary to the law and the insurance contract;
(d) Direct Respondent to pay compensation of Rs. 5,00,000/- for delayed action and degradation of the financial status of the complainant;
(e) Direct the Respondent to also pay the cost of the unnecessary litigation which had to be brought by the complainant for payment of the due claims on the Respondent Insurance Company amounting to Rs. 2,00,000/-."
5. The Opposite Party has filed its Written Statement and resisted the Complaint. It has denied all the material averments made by the Complainant. The Opposite Party has averred that the Insured's own internal inquiry, conducted days after the incident, merely apprehended sabotage without cogent proof. The gate valve, located in an underground pit, was submerged in leaked Molasses and could not have been conclusively examined at the time of alleged inspection on 1617.03.2017. The Policy condition under Clause V(d) places the burden on the Insured to prove that the loss was due to a malicious act, which the Complainant has failed to discharge. The Opposite Party relies on the Preliminary Survey Report dated 03.10.2017 and the Final Survey Report dated 01.02.2018. The Surveyor noted that the Tanks were located in a fenced and guarded enclosure near the main road and residential colony, with 24-hour security, and minimal chances of unauthorized intrusion. It was observed that the nuts, . bolts, and associated pipeline fittings were rusted and in a poor state of maintenance due to the pit remaining waterlogged. The Surveyor concluded that the damage was likely due to the shearing of bolts under pressure from the stored molasses, not due to sabotage; That the Police FIR under Section 427 IPC was lodged belatedly on 17.04.2017, more than a month after the incident, and the Final Police Report dated 16.12.2017 failed to identify any Culprit; That the Insured's claims of labour unrest or farmer agitation lacked evidentiary support and were neither cited in the FIR nor substantiated in the internal inquiry reports.
6. The Opposite Party has further averred in its Written Statement that that the Complainant's own maintenance lapses contributed to the incident, as the Tank had remained unused since 2015 and no Logbook was maintained. The possibility of an intruder accessing the pit, unbolting the rusted valve under significant fluid pressure, and escaping undetected, was implausible. Reliance is placed on the Excise Department's temporary permission dated 04.02.2017, which imposed strict security and maintenance obligations on the Complainant. The Opposite Party submitted that these had not been satisfactorily complied with; That the repudiation letter dated 28.03.2018 was issued after due application of mind, based on the findings of the appointed Surveyor, and hence was valid. Alternatively, without prejudice, the Opposite Party submitted that even if the Claim were found to be tenable, the maximum liability would be limited to Rs. 95,90,790/- as assessed by the Surveyor. On maintainability, it is averred that the Complainant is a commercial entity engaged in large-scale business and therefore falls outside the definition of "Consumer" under Section 2(d) of the Consumer Protection Act, 1986, relying on "Laxmi Engineering Works v. P.S.G. Industrial Institute, AIR 1995 SC 142" and "Sree Anantha Grameena Bank v. IFCI, IV (2005) CPJ 10 (NC)". The present dispute involves complex questions of fact and would require voluminous evidence, making it inappropriate for summary adjudication under the Consumer Protection Act. .
7. Rejoinder on behalf of the Complainant to the Written Statement by the Opposite Party has been filed; It has been averred in the Rejoinder that the incident of 12.03.2017 resulted from sabotage and malicious damage to Tank No. 4, as substantiated by multiple contemporaneous records. The Internal Inquiry conducted on 20.03.2017 and 21.03.2017 by senior managerial and engineering staff conclusively found signs of tampering of the discharge valve, with similar damage observed on adjacent valves. These findings, supported by physical evidence and photographic documentation, pointed to deliberate acts by unknown persons, and not mechanical failure or poor maintenance as alleged by the Opposite Party. The Estate Manager had, on the day of the incident, already reported a "conspiracy" to the Police; That the burden of proof under Clause V of the Standard Fire and Special Perils Policy (Material Damage) had been duly discharged. It emphasized that Insurance Claims are to be assessed on the standard of balance of probabilities, and not on the criminal law standard of proof beyond reasonable doubt. The Police had acted promptly on the Complainant's intimation dated 12.03.2017 and, after preliminary investigation, registered an FIR under Section 427 IPC. The Final Report filed under Section 173 CrPC on 16.12.2017 confirmed sabotage but noted that the Offender could not be identified, and hence the case was closed as untraced. The Complainant submitted that this conclusive finding by law enforcement Authorities satisfies the Policy's evidentiary requirement of "malicious damage".
8. It has been further averred in the Rejoinder that the credibility of the Final Surveyor report prepared by M/s. Adarsh Associates is also questionable, who visited the site only on 21.07.2017, more than 130 days after the incident, and who allegedly lacked a valid corporate IRDA license under Section 64UM of the Insurance Act, 1938. The earlier preliminary survey conducted by Mr. A.K. Mathur in March 2017 did not conclude any alternative cause of loss. The belated Survey findings were speculative and unsupported by any direct examination of witnesses, security logs, or local verification. In contrast, the Complainant had furnished all logs, inspection records, and maintenance documents, including prior approval from the Excise Department, and proof of valve integrity testing conducted before the Molasses storage had begun. Regarding the delay in FIR registration, the Complainant averred that the same was procedural and beyond its control, especially as the Police had already registered the NCR on the very day of incident. It contended that the Insurer had itself deputed Surveyors immediately, so no prejudice was caused due to the timing of FIR. It was also clarified that the Tank's design and Molasses' high viscosity ensured that the valve was not under extreme pressure, and the possibility of an intruder escaping was not improbable. The argument that an intruder would have been trapped or killed by the Molasses flow was dismissed as speculative and irrelevant to the Claim repudiation. The Complainant asserted that its facility was not impenetrable as alleged. It was also argued that the repudiation letter dated 28.03.2018 relied on Survey Reports prepared without transparency and in violation of the principles of natural justice. The Complainant had never been given access to Annexures to the Survey Report, nor were its objections addressed.
9. Evidence by way of Affidavit has been filed on behalf of the Complainant by Mr. Anshul Mohan Garg, General Manager (HR&L) of M/s. Kesar Enterprises Limited; and on behalf of the Opposite Party by Mr. Jaisurya Gupta, Assistant Manager of M/s. National Insurance Company Limited.
10. Heard Ld. Counsel for Complainant and the Opposite Party, and perused the material available on record.
11. Ld. Counsel for the Complainant has argued that the Insurance Company has repudiated the Claim on unjustified and hyper-technical grounds, despite assessment of the loss. The Complainant relies on "Khatema Fibres Ltd. v. New India Assurance Co. Ltd., 2021 SCC OnLine SC 818", to submit that although the Consumer Fora do not conduct forensic scrutiny of the Survey Reports, their jurisdiction exists where deficiency in service is evident. It is contended that the Insurer wrongly rejected the claim merely because Police investigation could not identify the Culprit, although malicious damage was otherwise established through Internal Inquiry Reports, Police preliminary enquiry, FIR, evidence of labour unrest, prior acts of vandalism, missing nuts, and attempts to break other valves. Ld. Counsel for Complainant submits that Police investigation is not a precondition to indemnification, and places reliance on "Gurmel Singh v. National Insurance Co. Ltd., Civil Appeal No. 4071/2022", which deprecates Insurers taking technical objections and refusing Claims on grounds beyond the control of the Insured. The repudiation is challenged as being founded on an invalid and unreliable Survey Report. The Complainant argues that the Loss Assessor's Report is vitiated because the Survey was conducted and signed by Mr. Tarun Yadav, who neither held a valid licence nor was duly appointed, while the Licensed Surveyor, Mr. A.K. Gupta, never visited the site. Further, the inspection occurred after a delay of 130 days, in violation of Regulation 13(2) of the IRDAI (Insurance Surveyors & Loss Assessors) Regulations, 2015 and the IRDA (Protection of Policyholders' Interests) Regulations, 2002. The Final Report was submitted nearly 11 months after the occurrence, contrary to the maximum permissible seven-month outer limit. Reliance is placed on "National Insurance Co. Ltd. v. Hareshwar Enterprises (P) Ltd., 2021 SCC OnLine SC 628", holding that Surveyor reports are not sacrosanct, and on "New India Assurance Co. Ltd. v. Pradeep Kumar, CA No. 3253/2002", which recognises that Survey reports can be departed from where contrary evidence exists.
12. Ld. Counsel for Complainant has further argued that regarding the burden of proof, the Insurer had applied an incorrect and excessively strict standard. The Complainant submits that Insurance Claims require a standard even lower than preponderance of probabilities, since the purpose of insurance is to mitigate uncertainty, and criminal-law standards have no application. Reliance is placed on "Parmeshwari v. Amir Chand, (2011) 11 SCC 635", and "Anita Sharma v. New India Assurance Co. Ltd. (2021) 1 SCC 171" which emphasise that strict standards of proof are inapplicable in compensation or insurance matters. It is contended that the Insurer wrongly relied on the Police Final Report under Section 173 CrPC, although the inability to identify an accused does not negate malicious damage. The Complainant submits that the damage itself is undisputed, and that the Insurer has failed to discharge its burden of proving an exclusion, as required under "United India Insurance Co. Ltd. v. Pushpalaya Printers, (2004) 3 SCC 694", "Peacock Plywood (P) Ltd. v. Oriental Insurance Co. Ltd., (2006) 12 SCC 673", and "United India Insurance Co. Ltd. v. Kiran Combers & Spinners, (2007) 1 SCC 368", which mandate that insurance exclusions must be strictly interpreted in favour of the insured in case of ambiguity.
13. Ld. Counsel for the Opposite Party has argued that it had issued a Fire Declaration Policy to the Complainant for the period 01.07.2016 to 30.06.2017, covering stock of sugar Molasses stored in M.S. tanks, including the risk of "Malicious Damage", which under the Policy requires that the loss must be caused by external violent means in a malicious act, with the burden of proving malice resting solely upon the insured. The Complainant had alleged that on 12.03.2017 some unknown person had deliberately damaged Molasses Tank No. 4, causing leakage and substantial loss, but the Claim was repudiated on 28.03.2018 on the ground that the Complainant failed to establish that the loss arose from a malicious act, and therefore the Claim did not fall within the scope of the Policy. Though the Complainant's Internal Inquiry Report suggested deliberate tampering of the gate valve, its seat and spindle being off-located, and a nearby valve also allegedly disturbed, this Report was incomplete, speculative and inconclusive, particularly as the Complainant inspected the gate valve only on 16/17 March 2017, 4 days after the incident, and when it was still submerged under leaked molasses in an underground pit; That Section V of the Policy explicitly places the burden on the Insured to prove malicious damage. The FIR dated 17.04.2017 was lodged more than a month after the incident, and although the Complainant claims to have informed the Police on the same day, the Opposite Party contends that such delay casts doubt on the allegation of sabotage. The Preliminary Surveyor, Mr. A.K. Mathur, inspected the site on 12.03.2017, 15.03.2017 and 13.04.2017, and recorded that the entire area, including pits and the road was flooded with Molasses, making inspection of the valve impossible initially. His photographs and Report dated 03.10.2017 further showed that even at the second visit the pit was submerged, requiring clearance before the valve could be accessed. He also recorded that Tanks No. 4 and 5 were located along a main road leading to the residential, administrative and factory areas, enclosed by a boundary wall and a locked steel gate, with access restricted and guarded by a 24-hour security post adjacent to the enclosure. In view of the constant movement on the main road and strict security, the Surveyor concluded that sabotage was practically impossible.
14. Ld. Counsel for the Opposite Party has further argued that the Police Final Report dated 18.12.2017, stated that no Culprit could be identified and the case was closed as un-traced. The detailed Survey and Monetary Assessment Report dated 01.02.2018 prepared by M/s. Adarsh Associates also recorded that the Tank enclosure was secured by boundary walls, barbed-wire fencing and a locked gate opened only by security personnel, and was situated in a busy area near the administrative building and residential colony. Routine patrolling by security guards and workers further reduced any possibility of unauthorized entry. The Surveyor also noted that while one gate valve in the pit had its spindle and top flange properly fitted, photographs provided by the Insured showed that the inner assembly of the involved "4" gate valve was missing, suggesting it had been re-fitted prior to the Surveyor's visit. The Complainant's officials could not provide a satisfactory explanation regarding this alteration. Ld. Counsel for Opposite Party has also argued that the leakage had occurred due to pressure exerted by the Molasses on the gate valve, resulting in the shearing of five bolts of the top flange, which were missing, and consequently causing deformation of the spindle and upper Flange leading to the leakage, and not due to any malicious act. It is emphasised that Tank No. 4, originally meant for distillery operations, had been holding residual Molasses since September 2015, during which period the distillery remained shut and no maintenance or pipeline checks were carried out. The Complainant's letter dated 07.02.2017 to the District Excise Officer also did not indicate that the Tank was being used actively. Moreover, the Insured maintained no Logbook for Tank maintenance. The Surveyor found no evidence of labour unrest or farmer distress, and although the Complainant referred to past retrenchments, it had admitted that retrenched workers had been engaged elsewhere and no disturbance or protest was reported. In these circumstances, and given the strong physical and security safeguards around the storage area, the allegation of malicious damage is unsupported, speculative and unproven, and the repudiation of the Claim was correct and fully justified under the Policy.
15. Now, we proceed on to consider the relevant reports relied upon by both sides in support of their respective cases. The first reliance of the Complainant side is on the Investigation Report submitted by its four Managerial Personnel who were the Deputy Manager (Env), Estate Manager, DGM(PROD) and G.M. (Engg.) on 20.3.2017, the text of which, as can be deciphered from the record, was not entirely legible, since a few words from the sentences on the first page of the said Report, which is on Page 124 of the Paper Book, had gone beyond the photocopy boundary, and the Complainant side does not appear to have filed any separate typed copies from their side. At any rate, the aforesaid Report dated 20.3.2017 as much can be clearly read, is as follows -
"As per the direction we have investigated into the recent two incidents....(illegible) in the factory for the first time since time of immemorial.
1. Damage to Computer on 10th March, 2017
As the iron piece was found lying besides the broken screen of the me....(illegible) the spot, it is absolutely clear that someone deliberately did it with intention of damaging Company's property. Tried to find out the culprit but failed to do so as at that point of time factory season closure was in p....(illegible) and number of workers, farmers moving roaming in the factory premises. Still have internally put persons to find out the culprit and we will reward the person who will find the culprit.
2. Molasses Spillage On 12th March 2017
On 16/17 March, 2017, when we could reach to check the bottom of molasses tank no. 4, we have found that the main valve was damaged/disturbed clearly indicating that it has been done deliberately by someone. The seat of the valve and its spindle was off located which can only be done forcibly. More valve of similar type in the vicinity of this v....(illegible) has also been found tampered/damaged. It is important to mention here that these valves are very sturdy made of C.l. and brass and can never take. Such shape even if some leakage starts from there due to some mechanical problem. Except the valve damage, here there was no damage/crack found in the body of the tank/pipe line. All the valves, fittings and pipe line etc. are absolutely perfect which can be inspected at any point of time. As the incidence took place on 12th March, 2017, being Sunday and Holi festival and also nothing unusual was noticed either by the security guard, on round, or by the dip/motorman, till morning hours it appears that someone with malafide intention choose the timing to damage the valve with the intention to put Company to loss for the reason that known to him. Have also announced to pay Rs. 10000/- to the person who gives /confirm the name of the person/persons involved in such dirty and malafide acts.
We have advised all our pump man and security persons and staff for observing utmost care in the light of such unforeseen incidences. Security has been tightened and instructed not to allow outsiders within the factory premises nor near the tank etc. comehwhatmay. Also exploring possibility including certain mechanical checks to be installed in the storage tanks to avoid any chance of recurrence of such mishaps in future to avoid tampering."
16. Next reliance of the Complainant's side is on a subsequent Inquiry Report submitted by its Additional General Manager (G.M./Legal)- Mr. Anshul Mohan and its Security Manager- Mr. Anil Kumar. The text of the said Report is set out as below-
"Inquiry Report- Regarding incident of Molasses Tank No. 4
We have conducted inquiry regarding leakage of molasses from Tank No. 4 on 12.03.2017. In the investigation it is found that initially three persons have seen this incident, we interrogated those persons who were present near the tank and recorded their statement, which are attached herewith for your perusal.
1. Statement of Mohan Lal -Pumpman Son of Kalyan Rai
2. Statement of Bharat Singh Rawat -Deputy Sales Officer Son of Shri Dollat Singh Rawat
3. Statement of Jitender Singh -Security Guard Son of Fakir Singh
It is evident from the statement of all three persons that on 12.03.2017 in the morning at about .... a.m. (illegible) when Molasses tank no. 4 was checked by Shri Mohan Lal at that time everything was okay. At about 12.00 P.M. when again Tank no. 4 was checked by Mohan Lal then he found that Molasses was leaking. He immediate (sic) informed about this to Shri Bharat Singh Rawat, Deputy Sales Officer and other Officers. Shri Bharat Singh Rawat reached at the spot and found that there was excessive leakage of molasses. Shri Jitender Singh Security Guard while on patrolling reached at the spot then he also witnessed this incident.
From the interrogation and from other circumstances which were observed by all of us it is clear that
- That somebody with an intent to cause loss to the company has done this act. This is not seems to be done for theft purposes.
- Whoever has committed this act he is a known person as tank is surrounded with walls from all four corners and there is lock on the gate.
- Because of day of Holi and being a Holiday it seems that this incident is committed at the noon time in the day.
We have announced a prize of Rs. 10,000/- to trace out that person, we hope that we will succeed in it. Apart from this in order to stop such kind of acts in the future we have taken the following steps with immediate effect.
1. Guards duty be more wakeful and he must take round inside also.
2. If any unknown own person found in the complex then through inquiry of him must be carried out.
3. The concerned employee must regularly check all the instruments carefully.
4. Officers must visit this place on regular basis."
17. The statements of the Pumpman- Mohan Lal, Deputy Sales Officer- Bharat Singh Rawat and the Security Guard- Jitender Singh did form part of the aforesaid Report. But on going through the aforesaid Statements, we find that only two of them namely, Mohan Lal and Bharat Singh Rawat had given their Statements regarding the reason for leakage of Molasses.
According to Mohan Lal, Pumpman -
"On 15.03.2017 till the time when Molasses of Tank No. 4 was finished, then on checking found that one spandie of Tank's volve was broken and volts of one spandie were broken Molasses was coming out of these only. This act has been committed by some person, spandie have been damaged with an intent to commit theft."
Thereafter, Bharat Singh Rawat, in his Statement had mentioned-
"Till 15.03.2017 entire Molasses stored in Tank No. 5, when its level went down then we saw that volt of one spandie were broken because of these lost spandies Molasses leaked out, somebody has intentionally did this.
Himself said that still the work of storing the leaked Molasses in Tank No. 5 is going on so that more and more Molasses can be stored."
18. The Security Guard namely Jitender Singh in his Statement had merely mentioned about how and when he had become aware about the leakage of Molasses, but did not say anything about the reason for such leakage as can be seen from his Statement to the questions put to him which are as follows -
"Q. 1 On 12.03.2017 what was your duty time and post?
Ans. My duty time was from 7.00 a.m. morning till 3.00 p.m. noon. On this day, I was on patrolling. In patrolling I have to take round in the factory area. I take round on cycle.
Q.2 What you have seen in Tank No. 4?
Ans. At about 12.00 p.m. I started taking second round from main gate. When I reached at Tank No. 4 then I saw that the lock at the gate of Tank was open. I looked inside and found that Mohan was there and Molasses was leaking. I immediately came back at main gate and informed. Thereafter, I went ahead on further round.
Q.3 After that what you have seen?
Ans. After coming back from colony round I saw that Molasses demolished the wall and it was coming out, near the colony gate and at the back of C02 gate inside. All the officers and employees were managing to stop the leakage of Molasses. "
19. It may be first noted that Report about the loss was promptly made by the Security Manager of the Complainant to the Station Incharge of Thana, Baheri on the date of incident (12.03.2017) itself as can be seen from the document Annexure P/7. On the basis of the said Report, an FIR bearing No. 0133 was subsequently drawn up on 17.4.2017 (Annexure P/13), on the recommendation of Sub-Inspector- Umesh Kumar attached to the said Police Station, who conducted an investigation by visiting the Complainant's factory premises and reported that -
"It was found that some unknown person with an intention to cause financial damage to the Company has meddled with the discharge valve of the Tank resulting in huge molasses leakage. This is someone's pre-planned conspiracy which had an objective to cause financial loss to the Company". It was on the basis of such report/recommendation of the Sub-Inspector that an FIR under Section 427 of IPC was registered."
20. A Final Report was ultimately submitted by the concerned Investigating Officer in the aforesaid FIR on 18.12.2017 in which it was noted as follows -
"Final Report
NCR No. 133/17 Under Section 427 of IPC vs. unknown
Sir, it is submitted that on the above NCR on the basis of Tehrir of above complainant registered at this police station and investigation by the order of Hon'ble J.M. Behadi under Section 155(2) Cr.P.C. is handed over to me SI. From the investigation carried out till this moment, statement of complainant, inspection at the place of incident, statement of witnesses and other evidences whereabouts of unknown accused have not been traced out. Investigation is pending since long and it is not in the interest of justice to keep it pending any more. Therefore, the whereabouts of unknown person has not been traced and nor any clue of him is found thus the investigation in the present NCR is closed vide this Final Report.
Therefore it is requested to your good self Kindly accept the Final Report. "
21. We can, thus, summarize that according to the Complainants, leakage from the Tank in question had occurred on account of wilful sabotage/tampering by some unknown person(s) with a view to cause loss to the Complainant, although identity of the culprit(s) involved could not be established even by the Police Authorities, who investigated the matter for more than 9 months, after which they ultimately decided to close the case by categorically observing that identity of the concerned culprit(s) could not be ascertained. It may also be remarked that there is no indication in the Reports drawn up/submitted by the Police Authorities to the effect that the damage could not have been on account of such sabotage, or that it could have been caused by any other reason such as poor maintenance, as has been contended on behalf of the Opposite Party/ Insurer.
22. From their side, the Insurers/Opposite Parties have relied upon the Final Report of the Surveyor in coming to the conclusion that leakage from Tank No. 4 was not on account of any sabotage attributable to any unknown person, but had occurred on account of the bad condition of the equipment involved, being the spindle and flanges of the concerned valve of the said Tank. It may be mentioned that the relevant extracts in the Surveyor's Final Report on the basis of which it was determined that the reason for leakage/damage to the Insured was not on account of any Insured peril, are relatively exhaustive and detailed. The aforesaid detailed observations of the Surveyor, which are on Pages 260 to 262 of the Paper book are re-produced hereinafter. Although no Para or Subpara numbers were assigned to the various paras forming part of the Surveyor's report, we have nevertheless assigned numbers to the same, in the interest of a more convenient reference to the various contentions raised by the Surveyors, and examination of the same on their relative merits. Such detailed observations of the Surveyor are thus set out as below -
(i) "Our Observations/Contention: The separate enclosure, housing involved molasses tank no. 4 as well as tank no. 5, was protected with boundary wall/ barbed wire fencing. The only entrance to the said enclosure, had a high steel gate which was always kept locked and opened by security guard, only when required. The said enclosure, was located next to admin building/residential colony, along the main road, which was in use/rarely deserted. Further, as reported by Insured that the various security guards/motorman/ other workers used to take routine patrolling of the area, therefore chances of any unauthorized person entering the area, without being noticed, were very slim/not likely.
(ii) During our 2nd visit to site on 21.07.17, we requested Insured to take out the captioned gate valve provided in 4" dia discharge pipeline by opening the nuts & bolts provided at flanges on both sides of gate valve, installed in the underground open pit in near vicinity of the involved tank no. 4. However, the same could not be opened, despite making efforts for more than 3 hours, as the nuts/bolts were in jammed/poor / rusted condition. The bolts could also not be cut using gas cutting etc.
(iii) Thereafter, we requested Insured to open the top flange of said gate valve, which was in partly tilted/ open condition, which was held only by 1 remaining bolt (as the other remaining 5 bolts for holding the upper flange were missing) by breaking/shearing the same. On removing the upper flange of the gate valve, the said gate valve was inspected in partly open condition.
(iv) Besides above, during our visit to site it was observed by us that the another gate valve; provided in the pit in another pipeline was having spindle & top flange duly bolted with the bottom flange of valve. However, while examining the photographs provided by the Insured, it was observed that the inner assembly i.e. spindle & top flange of the said 4" gate valve, provided in above line, was missing. The said photograph is enclosed as 'D-30' and therefore the same suggests that the spindle & upper flange of the said valve, was fitted subsequently i.e. prior to our visit to site. Our enquiries with Insured's concerned officials in this regard, did not elicit any proper/ satisfactory response.
(v) In view of the above, we are of the considered opinion that the molasses leaked out from the opening created due to pressure of molasses exerted on the gate valve, resulting shearing of 5 bolts of the top flange of the aforesaid gate valve in discharge line, which were missing and as a result, the spindle/ upper flange of valve deformed leading to opening from its front side and leakage of molasses.
(vi) Further, it was ascertained that the involved tank, originally meant for storage of molasses for distillery division, was holding balance qty of molasses since Sept. 2015, when the distillery was shut down and was not in use. Therefore, no maintenance/checking of pipeline etc. were carried out during above period though the Insured argued about the same, otherwise.
(vii) In this respect, Insured contended that after obtaining permission for using MS tank no. 4 for storage of molasses of sugar mill, they had cleaned the tank and carried out necessary testing of the tank. However, the Insured's letter dtd 07.02.17 addressed to Distt. Excise Officer, Bareilly, did not mention about any testing of tank and mentioned only demarcation/ identification for storage of molasses of their sugar mill. Further, in response to our query, the Insured confirmed that they do not maintain any inspection/ maintenance log book for various tanks.
(viii) In view of our above observations, we apprised Insured that the said incident is not an act of malicious damage, due to following reasons:-
(a) The molasses storage tank no. 4 & 5 were installed in a separate area, protected both boundary walls all around and 1 no. iron gate, which was kept in locked condition.
(b)The said enclosure/ area, was situated at main road, near the admin office/ residential area and most of the time was never deserted.
(c) The entire complex was guarded/ protected by more than 25 security guards in both shift + 10 to 12 Insured's own staff, during crushing season and around 20 security guards during off season.
(d) Labor unrest or farmer's distress was reported by Insured on any account, ..............(illegible) that some workers retrenched by them in past, but also stated that some of the retrenched workers were employed/ engaged in other/ different jobs/..........(illegible) etc.
As such, there was no incident of any unrest/ protest reported ........(illegible) payments of outstanding dues to farmers etc.
(ix) Further, if Insured had any apprehension that any of their previous worker/ employee had caused above damage, the same have neither been reported by them in the FIR nor in the internal enquiries/ investigation report, conducted by them.
(x) The Insured also stated that one of their computer monitor, was found damaged/ broken on 10.03.2017 in admin office. However, no FIR was lodged/ nor any enquiry was conducted by Insured in respect of said incident.
(xi) Not only the nuts & bolts of involved gate valve but also all the other valves/ pipelines/fillings in the area, more particularly in the underground pit, were badly rusted/ in poor state of up-keep/ maintenance, due to the fact that the said pit normally used to remain filled with rain water etc. being underground/ at lower level including the said valve and as such, we are of the opinion that the involved gate valve could not be opened by any intruder easily, as the same would take substantial time to open/distort.
(xii) Further, the said gate valve was provided in the pit by the side of tank, along with other fittings/ pipes, which provided very little room for maneuvering.
(xiii) Also, it is not possible to understand that any intruder will take the above course for causing loss/damage to Insured, by damaging /opening of gate valve of the pipe line, which is subjected to pressure of 42,000 qtls of molasses, stored in tank no. 4, at time of incident and if succeeded to open the valve, the same would lead to sudden gush of molasses, which would not leave time/ chance for the intruder acting with malicious intent, to escape from the said location. Further, the molasses is a high viscous substance and would trap the intruder/ would not allow him to escape.
(xiv) Therefore, in view of above, we are of the categorical opinion that i) the entry of any unknown person/intruder inside the enclosure housing molasses storage tank no. 4 & 5, was very unlikely, as also reported by the preliminary surveyor and ii) the bolts of the gate valve failed on its own, due to poor/ rusted condition, under pressure exerted by the stored molasses, leading to above incident of leakage of molasses.
(xvj) As such, the said loss was not caused by any Insured peril and is not indemnifiable under the captioned policy."
23. The Surveyors have thus concluded that the damage by way of leakage of Molasses from the Tank No. 4 would have been on account of poor condition of the concerned valve of the Tank in question, which suffered shearing of 5 bolts of its top Flange which were found missing, and that it would not have been likely/possible for any intruder to have come and intentionally caused the damage.
24. The Surveyors came to such conclusion by taking into account certain factors such as the area being under lock and key, protected by boundary walls, iron gate, its location at the main road near the Administration office/residential area, and presence of Security Guards in the entire Complex. In addition, the Surveyors were also not convinced by the explanation of the Insured that the sabotage could have been caused by any disgruntled worker(s) following their retrenchment, or by any agitated farmers whose payments had not been made by the Complainant. In addition, in their observations, the Surveyors have also taken note of the existing conditions as seen by them at the locale, the alleged jammed/poor/rusted condition of the nuts and bolts provided at the Flange on both sides of the gate valve installed in the underground open pit near vicinity of the involved Tank No. 4, which could not be opened despite making efforts for more than three hours. In Para 4 of the aforesaid observations, the Surveyors have also relied upon a. photograph provided to them by the Complainants, on the basis of which the Surveyors assumed that the spindle and upper Flange of the other gate valve provided in the pit of any pipeline was fitted subsequently by the Insured i.e. prior to the Surveyor's visit to the site. The photograph in question happens to be the one marked as 'D-30' referred to in the Report. In view of the specific reference to this particular photograph relied upon by the Surveyors, the single Bench hearing this matter on 4.7.2024 had specifically directed the Opposite Parties to file the same, and thereafter to explain location of the concerned gate valve in the photograph and its relevance to the valve from where the discharge/leakage had actually occurred.
25. In compliance of the aforesaid direction passed on 4.7.2024, the Opposite Parties from their side filed all 30 photographs which the Surveyors had arranged after the same had been provided to them by the Insured, on 8.7.2024. We find that the material photograph in question (D-30) is on Page 12 of the documents filed by the Opposite Parties, and corresponds to the photograph which is in the middle of Page 81 of the original Complaint/Paper Book. The concerned photographs thus filed by both sides are reproduced herewith -
(a) Filed by the Complainant (Page 81 of the Paper Book)
(b) Filed by Opposite Parties (on 8.7.2024)
26. From their side, the Complainants have commented upon the observations of the Surveyors in Sub-paras (ii) to (v) by first of all drawing attention to photographs bearing D-4, D-5, D-19, D-20, D-21 & D-22 which are greater close-ups of the Valve V-2 which is also depicted in photograph D-30 and which was specially referred to in the Surveyor's Report. According to the Complainants, the Second Survey which has been referred to in the Report was conducted on 21.7.2017 i.e. 122 days after the loss had initially occurred. The Valve in question installed in the open underground pit had remained submerged in Molasses and dirty water causing rusting and jamming of nuts and bolts, on account of which it could not be opened after 122 days, and in any case could also not have been opened by using a gas cutter since Molasses by nature is an inflammable substance. The Complainants further assert that the gate Valve V-1, the close up of which is shown in photographs D-4, D-5 and D-9 to D-22 was sabotaged from which the Molasses had leaked, which had been seen by the Surveyor. On the other hand, the Valve V-3 is located on the pipeline, after the strainer, going to the pump which is used for collecting the spillage of Molasses from the pit/sump, and has nothing to do nor any role to play with the leakage, being the isolating Valve for the pump. Lastly, the Complainants have asserted that even the Surveyor had noted that the Molasses had leaked due to static pressure of Molasses exerted on the Valve V-1 whose 5 bolts were found broken/sheared, which according to the Complainants could have only been done by way of sabotage by someone.
27. Thus, considering the explanations pertaining to the actual cause of leakage of Molasses as raised on behalf of both sides, we are of the opinion that the Claim of the Complainants would appear to be based on reasonably convincing material in comparison to the grounds on which it had been repudiated by the Insurer/Opposite Party on the basis of the Surveyor' Report. We say so because the Surveyors appear to have come to their conclusion based only on conjectures and surmises. It has transpired from the record that the total area of the Complainant's establishment is vast (65 Hectares) and the occurrence had taken place on a day when there was very limited presence of the factory personnel including Security Guards, since it happened to be not only a Sunday, but also a festival day (Holi). At the relevant time, the lone Security Guard on duty namely Shri Jitender Singh happened to be on a patrolling round in the Campus of the Complainant which he was doing by cycle. He had stated that he started his second round of patrolling from the main gate at around 12.00 noon and on reaching the Tank No. 4 he found that the pumpman, Mohan Lal and was present there, and the Molasses was flowing. Yet the Surveyors were of the opinion that no sabotage could have been possible by any outsider in view of the place being under heavy security arrangements. We, however, do not consider this to be a reasonable supposition. Suffice it to say, happening of the occurrence on a day on which attendance in the factory premises was very sparse due to it being a Sunday as well as the day of "Holi", cannot be held against the Complainants when we take Judicial Notice of unfortunate occurrences frequently happening all around us in which breaches do occur in spite of being having the finest security arrangements in place. Further, even the Police Officers who investigated the matter for a long time, at no point were of the view that there was no sabotage or intentional act behind the occurrence, although they were unable to identify or apprehend the actual culprit(s). To sum up, therefore, we are of the considered view that in the totality of the entire facts and circumstances, the Complainants have been able to establish their claim on the basis of reasonable "pre-ponderence of probabilities", and are not expected to furnish any further proof as strictly as in any criminal trial.
28. It is the assertion of the Complainants that the Surveyors have motivatedly submitted a "biased report" to wrongfully shield the Insurer from its liability, and such Report is therefore not to be relied upon. We find merit in this submission, in view of the observations of the Hon'ble Supreme Court in 'National Insurance Co. Ltd. Vs. Hareshwar Enterprises Pvt. Ltd. & Ors., (2021) 17 SCC 682"; in which the Hon'ble Apex Court had observed that the Surveyor's Report in any given case cannot necessarily be considered as a sacrosanct document.
29. While thus considering the Surveyor's Report as unreliable being based on conjectures and surmises regarding the cause behind leakage of the Molasses, we nevertheless are satisfied that his assessment of the quantum of damage sustained by the Complainants in the said Report does appear to be balanced and objective. He had made proper calculations regarding the loss of Molasses, which are in Para 12 of his Report (Page 266 of the Paper-book) and estimated that the gross loss which included wastage/spoilage, the expenses incurred for recovery of the Molasses salvaged, the JCB and Vacuum Tanker charges as also the Labour charges incurred by the Complainants, were to the tune of Rs. 1,00,95,568.81 paise. From the aforesaid gross loss, the Surveyor had rightly deducted 5% by way of Policy excess in view of the explicit condition in the Insurance Policy. Consequently, the net adjusted loss was determined to be Rs. 95,90,790.37 which was rounded off to Rs. 95,90,790/-.
30. We are therefore of the opinion that the Complainants are entitled to be disbursed the aforesaid amount in accordance with their coverage under the Insurance Policy.
31. The Complaint is therefore allowed, and the Opposite Parties are directed to pay the amount of Rs. 95,90,790/- to the Complainants alongwith interest @ 6% p.a. from the date of repudiation of the Insurance Claim by them, within three months from the date of passing of this Order.
32. In case of non-compliance of the Order within the directed time, the interest rate shall be enhanced to 8% p.a. for any outstanding amount(s).
33. In addition, litigation costs assessed at Rs. 50,000/- are also awarded to the Complainants.
34. Pending application(s), if any, also stand disposed off as having been rendered infructuous.
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